FOURTH AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP OF
SAN DIEGO LITHOTRIPTERS LIMITED PARTNERSHIP
THIS AMENDMENT, effective as of the 15TH day of February,
1999, is entered into by and among Lithotripters, Inc., a North Carolina
corporation and the General Partner of San Diego Lithotripters Limited
Partnership, a California limited partnership (the "Partnership"), and the
Limited Partners of the Partnership.
R E C I T A L S:
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1. The General Partner and the Limited Partners, hereinafter
collectively referred to as the "Partners," are parties to that certain
Agreement of Limited Partnership of San Diego Lithotripters Limited Partnership,
as amended (the "Agreement").
2. Effective as of February 15, 1999, the General Partner and
the requisite percentage of the Limited Partners consented in writing to the
following amendments to the Agreement, such amendments intended to: (i) allow
the General Partner the authority to periodically offer and sell additional
limited partner interests (a "Dilution Offering") to local investors;(ii)
clarify and strengthen the noncompetition provisions of Articles 15.3 and 18.4
of the Agreement; (iii) add a new provision to the Agreement to prevent the
disclosure of Confidential Partnership Information that might harm the
Partnership and its Partners; and (iv) allow the General Partner, in its sole
discretion, to elect to assign to the Partnership its rights under Article 18 of
the Agreement to purchase the Partnership Interest of any deceased, insolvent or
competing Limited Partner:
NOW, THEREFORE, in accordance with Articles 29 and 30 of the
Partnership Agreement and pursuant to the written consent of the General Partner
and the requisite percentage of the Limited Partners, the parties hereto agree
as follows:
The Agreement is hereby amended as set forth in
Exhibits A, B and C attached hereto.
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IN WITNESS WHEREOF, the Partners have hereunto set their hands
and seals effective as of the date first above written.
GENERAL PARTNER:
LITHOTRIPTERS, INC., a North Carolina corporation and
sole general partner of the Partnership
By:_________________________________________
Title:________________________________________
ALL THE LIMITED PARTNERS OF
THE PARTNERSHIP WHOSE NAMES
APPEARED ON SCHEDULE A-3
By:/s/ Xxxxxx Xxxxxxx, M.D.
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Xxxxxx Xxxxxxx, M.D.
Attorney-in-Fact*
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*Pursuant to a Power of Attorney given by the Limited Partners in the
Agreement.
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EXHIBIT A
DILUTION OFFERING AMENDMENT
1. Capitalized terms used in this Exhibit and not otherwise defined shall
have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters
Limited Partnership (the "Partnership").
2. The purpose of this Exhibit is to set forth a proposed amendment to the
Partnership Agreement that would give the General Partner the authority
periodically to offer and sell additional limited partner interests
("Dilution Offerings") to local investors who are not Limited Partners
in the Partnership ("Qualified Investors"). As required by Articles 28
and 29 of the Partnership Agreement, to be effective this amendment
must be approved by the Partners representing two-thirds of the
aggregate interests in the Partnership.
3. The purposes of a Dilution Offering are (i) to raise additional capital for
any valid Partnership purpose, and (ii) to assure the highest quality of
patient care by admitting Qualified Investors to the Partnership who will
be dedicated and motivated as owners to follow the Partnership's treatment
protocol, and comply with its quality assurance and outcome analysis
programs. Any additional capital raised by the Partnership in a Dilution
Offering can be used for any legitimate Partnership purpose, including
upgrading the Partnership's Lithostar(TM)Mobile System, and/or upon the
vote of a Majority in Interest of the Limited Partners, the acquisition of
an additional lithotripter and transport vehicle.
4. In the event the Dilution Offering Amendment receives the requisite
approval of the Limited Partners, the General Partner intends to conduct a
Dilution Offering for the purposes of raising additional capital for (i)
upgrading and refurbishing the Partnership's Lithostar(TM) Mobile System,
and (ii) acquiring and operating a new Storz Modulith(R)SLX-T ("SLX-T")
model lithotripter and a new mobile transport vehicle for transporting the
SLX-T from site to site in the Partnership's current service area. It is
estimated that the cost for the SLX-T and transport vehicle will be
approximately $525,000. In the event the proceeds of the Dilution Offering
alone are insufficient to fund the necessary upgrades of the Lithostar(TM)
Mobile System and the purchases of the SLX-T and transport vehicle, the
necessary additional funds will be borrowed (the "Loan") by the Partnership
from a commercial financial institution acceptable to the General Partner.
The General Partner anticipates that the Partnership will be the principal
guarantor of the Loan. Therefore, the Limited Partners will not be liable
for such debt individually. However, payments by the Partnership under the
Loan will impact the cash flow of the Partnership, and therefore the
distributions to be received by the Limited Partners from Partnership
operations during the term of the Loan.
The General Partner believes that the acquisition of a new lithotripter
and transport vehicle are in the best interests of the Partnership. Due
to certain market forces existing in the
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Partnership's current service area, the demand for alternative
technology to the Partnership's Lithostar(TM) has increased. The
General Partner and the Partnership's Medical Director believe that the
best means for the Partnership to address such demand, and thereby
remain competitive in the Partnership's market area, is to provide the
equipment technology available with the SLX-T. The General Partner,
however, reserves the right to pursue technology other than the SLX-T
if such alternative technology is more beneficial to the Partnership
and the Limited Partners. As required by Article 28 of the Partnership
Agreement, the acquisition of a new lithotripter, and the Partnership's
incurrence of debt in excess of $100,000 per year (if necessary to fund
the acquisition of the lithotripter and transport vehicle), must be
approved by the General Partner and a Majority in Interest of the
Limited Partners.
5. Any sale of limited partner interests to Qualified Investors will
result in the proportionate dilution of the Partnership Percentage
Interests of the existing Partners; i.e., the interests of the General
Partner and the Limited Partners in Partnership allocations, cash
distributions and voting rights will be proportionately reduced by a
successful Dilution Offering.
6. The Percentage Interests of the existing Partners cannot be diluted
through Dilution Offerings by more than 20% in the aggregate without
the prior written consent of a Majority in Interest of all the
Partners. Without obtaining this additional consent, the existing
Partners cannot be diluted to less than 80% of their Percentage
Interest ownership at the time of this Amendment.
7. The General Partner has determined that the purchase price per 1%
Partnership Interest offered in the initial planned Dilution Offering
will be at its fair market value as determined by an independent third
party appraiser (Xxxxxxxx, Ball & Company). The price for Units sold in
future Dilution Offerings also must be at a price no less than fair
market value as determined by the General Partner and a third party
appraiser.
8. Upon the successful sale of Partnership Interests in a Dilution
Offering, the General Partner will prepare and attach a new Schedule A
to the Partnership Agreement to reflect (i) the Partners' adjusted
Percentage Interests in the Partnership, and (ii) the admission of the
new Limited Partners to the Partnership.
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EXHIBIT B
NONCOMPETITION PROVISION AND
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CONFIDENTIALITY PROVISION AMENDMENTS
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Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters Limited
Partnership (the "Partnership"), and any amendments thereto.
Noncompetition Provision Amendment
Article 15.3 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below:
15.3 Outside Activities. The Limited Partners agree
that they owe fiduciary duties to the Partnership and, as a
consequence, each Limited Partner (that is not the General Partner or
an Affiliate of the General Partner) agrees that he or she shall not
engage in "Outside Activities" (as defined below) in the "Market Area"
(as defined below) while he or she is a Limited Partner in the
Partnership. The phrase "Outside Activities" means directly or
indirectly owning, leasing or subleasing a lithotripter (or any similar
equipment or competing devices used for treating renal or biliary stone
disease). Prohibited indirect ownership shall include the direct or
indirect ownership of any interest in a business venture (through stock
ownership, partnership interest ownership, ownership by or through a
close family member, or as otherwise determined in good faith by the
General Partner) involving the ownership, purchase, lease, sublease,
promotion, management or operation of a lithotripter (or similar
equipment or competing devices used for treating renal or biliary stone
disease), unless the General Partner determines that such activity by
the Limited Partners is not detrimental to the best interests of the
Partnership.
Upon the termination or transfer of a Limited
Partner's interest in the Partnership for any reason, including a
transfer pursuant to Article 18.4 hereof, the withdrawing Limited
Partner shall not, for a period of two (2) years following the date of
his or her withdrawal, engage in any Outside Activities in any "Market
Area" in which the Partnership is transacting business or within the
prior twelve months has transacted business (the "Restricted
Facilities"). For the purposes of this Article 15.3, the term "Market
Area" shall mean (i) the area within a ten mile radius of any
Restricted Facility, but if such area is determined by a court of
competent jurisdiction to be too broad, then it shall mean (ii) the
area within a five mile radius of any Restricted Facility, but if such
area is determined by a court of competent jurisdiction to be too broad
then it shall mean (iii) the area within a two mile radius of any
Restricted Facility.
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In the event a Limited Partner wishes and intends to
engage in an Outside Activity in a Market Area, he or she must provide
written notice of such intent to the General Partner prior to engaging
in the Outside Activity. The written notice shall be deemed an election
by the Limited Partner to withdraw from the Partnership (the "Notice of
Withdrawal"), and shall give the General Partner and/or the Limited
Partners the purchase rights as provided in Article 18.4 hereof. After
the Notice of Withdrawal, the former Limited Partner may engage in an
Outside Activity in the Market Area only after waiting the period of
two years specified in this Article 15.3. In the event of breach of the
waiting period, the Partnership shall be entitled to any remedy at law
or equity with respect to such breach, including without limitation an
injunction or suit for damages.
If a Limited Partner during his or her participation
in the Partnership engages in an Outside Activity in a Market Area
without first notifying the General Partner in violation of this
Article 15.3, the Limited Partner shall be deemed to have given a
Notice of Withdrawal on the date the General Partner first becomes
aware of the Limited Partner's Outside Activity in the Market Area.
Upon receiving a Limited Partner's Notice of Withdrawal or equivalent
thereof, the General Partner and/or Limited Partners may invoke the
purchase rights provided in Article 18.4 and shall be entitled to any
other remedy at law or equity including without limitation an
injunction or suit for damages.
Article 18.4 of the Partnership Agreement is hereby amended by
deleting the current provision in its entirety and by substituting the language
set forth below.
18.4 Breach of Article 15.3. In the event the General
Partner either receives a Notice of Withdrawal as provided in Article
15.3 or receives notice of a breach of Article 15.3 by a Limited
Partner (the "Defaulting Limited Partner"), the General Partner may
elect, in its sole discretion, to treat such event as a default under
this Agreement and enforce the provisions of this Article 18.4. If the
General Partner elects to enforce the provisions of this Article 18.4,
the General Partner shall give written notice of such election (the
"Notice of Default") to the Defaulting Limited Partner within 180 days
of the date the General Partner first received notice of the defaulting
event. Upon giving the Notice of Default, the General Partner, shall
have the option to purchase at the Closing (as defined below) the
Partnership Interest of the Defaulting Limited Partner (which
Defaulting Limited Partner shall then become obligated to sell such
Partnership Interest) at the price determined in the manner provided in
Article 18.6 of this Agreement and on the terms and conditions provided
in Article 18.7 of this Agreement. The General Partner shall have a
period of thirty (30) days following the date of the Notice of Default
(the "First Option Period") within which to notify in writing the
Defaulting Limited Partner, whether the General Partner wishes to
purchase all or a portion of the Partnership Interest of the Defaulting
Limited Partner. If the General Partner does not elect to purchase the
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entire Partnership Interest of the Defaulting Limited Partner before
the expiration of the First Option Period and in the manner provided
herein, the Limited Partners shall have the option to purchase all or
any part of the Partnership Interest of the Defaulting Limited Partner
not purchased by the General Partner at the price determined in the
manner provided in Article 18.6 of this Agreement and on the terms and
conditions provided in Article 18.7 of this Agreement. Any Limited
Partner desiring to purchase any part or all of the remaining
Partnership Interest of the Defaulting Limited Partner shall deliver to
the General Partner a written election to purchase all or a specified
portion of such Partnership Interest within the ten (10) day period
immediately following the close of the First Option Period (the "Second
Option Period"). If the Limited Partners in the aggregate elect to
purchase more than the Partnership Interest then available, each
electing Limited Partner shall have a priority, up to that portion
specified in his or her notice of election, to purchase such proportion
of the Partnership Interest of the Defaulting Limited Partner then
available as his or her Percentage Interest bears to the aggregate
Percentage Interests of the Limited Partners electing to purchase. That
portion of the Defaulting Limited Partner's Partnership Interest not
purchased on such a priority basis shall be allocated in one or more
successive allocations to those remaining Limited Partners electing to
purchase more of the Partnership Interest than they have a priority
right, up to the portion specified in their respective elections, in
the proportion that each of their Percentage Interests bears to the
aggregate Percentage Interests of all of them. The Valuation Date for
determining the price paid for the Defaulting Limited Partner's
interest under Article 18.6 shall be the last day of the month
immediately preceding the month in which occurs the Notice of
Withdrawal or breach of Article 15.3.
Within the ten (10) day period immediately following
the close of the Second Option Period (the "Confirmation Period"), the
General Partner shall inform each electing Limited Partner of the
portion of the Partnership Interest of the Defaulting Limited Partner
as to which his or her election is effective. The General Partner shall
give notice to the Defaulting Limited Partner within the ten (10) day
period following the close of the Confirmation Period (the
"Notification Period") of the election by the Limited Partners to
exercise their option. Such notice shall indicate the portion of the
Defaulting Limited Partner's Partnership Interest that will be
purchased by each of the purchasing Limited Partners and the General
Partner, if any.
Confidentiality Provision Amendment
Article 15 of the Partnership Agreement is hereby amended by
adding a new Article 15.5 as set forth below:
15.5 Disclosure of Confidential Information. Each Limited Partner acknowledges
and agrees that his or her participation in the Partnership under this
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Agreement necessarily involves his or her understanding of and access
to certain trade secrets and other confidential information pertaining
to the business of the Partnership. Accordingly, each Limited Partner
(other than the General Partner and its Affiliates that may also hold
Limited Partner interests) agrees that at all times during his or her
participation in the Partnership as a Limited Partner and thereafter,
he or she will not, directly or indirectly, without the express written
authority of the Partnership, unless required by law or directed by a
applicable legal authority having jurisdiction over the Limited
Partner, disclose or use for the benefit of any person, corporation or
other entity (other than the Partnership), or himself or herself, (i)
any trade, technical, operational, management or other secrets, any
patient or customer lists or other confidential or secret data, or any
other proprietary, confidential or secret information of the
Partnership or (ii) any confidential information concerning any of the
financial arrangements, financial positions, hospital or physician
contracts, third party payor arrangements, quality assurance and
outcome analysis programs, competitive status, customer or supplier
matters, internal organizational matters, technical abilities, or other
business affairs of or relating to the Partnership. The Limited
Partners (other than the General Partner and its Affiliates that may
also hold Limited Partner interests) acknowledge that all of the
foregoing constitutes proprietary information, which is the exclusive
property of the Partnership. In the event of breach of this Article
15.5 as determined by the General Partner, the Partnership shall be
entitled to any remedy at law or equity with respect to such breach,
including without limitation, an injunction or suit for damages.
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EXHIBIT C
PURCHASE OPTION ASSIGNMENT AMENDMENT
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Capitalized terms used in this Exhibit and not otherwise
defined shall have the same meaning as provided in the Agreement of Limited
Partnership (the "Partnership Agreement") of San Diego Lithotripters Limited
Partnership (the "Partnership").
Purchase Option Assignment Amendment
Articles 18.1.2, 18.2.2, 18.3.2 and 18.4.2 are hereby amended
to allow the General Partner to either exercise its purchase option rights
during the First Option Period as provided in such Articles, or to assign such
purchase option rights in whole or in part to the Partnership. If the General
Partner's purchase option rights are assigned to the Partnership as provided
herein, the Partnership shall have the right to use Partnership revenues to
exercise such rights. Further, Articles 18.6 and 18.7 are also amended by
substituting the Partnership as a buyer to the extent the General Partner elects
to assign to the Partnership its purchase option rights under Articles 18.1.2,
18.2.2, 18.3.2 and 18.4.2. If the Partnership acquires a Partnership Interest
pursuant to the terms of this Amendment, then the General Partner shall have the
authority to amend Schedule A to the Partnership Agreement to reflect the
deletion of the interests held by the selling Limited Partners (or their
successors in interest), and to reflect the increased Percentage Interests of
the remaining Partners resulting from the redemption.
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